Car insurance premiums have surged by 67% on average in the past year. As a result of this insurers are rapidly introducing new “essentials” cover tiers to offer more affordable alternatives. This is according to analysis by Fairer Finance.
The consumer group is urging insurers to ensure full transparency so consumers understand exactly what these stripped-back policies do and do not cover.
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Among the largest 10 car insurers, 60% now offer ‘essentials’ policies, as the sector pivots towards more budget-friendly options. These policies typically provide more cover than basic third-party, fire, and theft policies, but omit many features found in standard car insurance policies.
Common exclusions in ‘essentials’ policies
Things often omitted in these polices include windscreen cover, stolen key replacement, courtesy cars, and the uninsured driver promise (a guarantee to reinstate no-claims discounts and reimburse excess if involved in an accident with an uninsured driver).
Admiral, Ageas, and Hastings have offered these policies for some time, but 2023 saw newcomers including Churchill, Sainsbury’s, and Geoffrey Insurance adding an “essentials” policy to their product list, as well as new insurers like Boom and Moja introducing them as an option.
James Daley, Managing Director at Fairer Finance, the consumer group and ratings provider, commented: “Many insurance brands that once had a single comprehensive car insurance policy, now can have three or four different sub-brands all offering different tiers of cover. This brand stacking is designed to ensure they can keep their name at the top of the price comparison charts, but it makes choosing the right policy all the more difficult for consumers. There’s no standard definition of an essentials policy, with some insurers stripping out windscreen cover, while others have raised excesses, or removed cover for lost or stolen keys.
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By GlobalData“Since many customers will opt for essentials cover due to the lower price, it is vital for insurers and comparison sites to be clear about the exclusions and limitations of these policies. People need to understand these restrictions at the time of purchase rather than at the time of making a claim. Customer trust will only further erode if the industry doesn’t address this.”
The latest findings from the Fairer Finance Trust in Insurance Index in March revealed that consumer trust in car insurance experienced a notable decline in the last six months, coinciding with a significant increase in premiums. The index, derived from a comprehensive poll of 10,000 consumers, indicated a shift in sentiment, with dissatisfaction mounting as premium costs soar.
